May 24, 2013

Did you hear the Joke about Android being the Market Leader?

In March we posted a report titled "In the Real World, Apple's iPhone and iPad are Still King." In that report we clearly stated that "In the real world, Apple's iPhone and iPad are still king in their respective categories. Nothing has changed except for the press's view of the world. The established press has created this grand consumer mirage that's a true disservice to the overall market. The press is mentally stuck in using a "volume" of cell phones metric as a measurement of technology leadership. They use Samsung's entire fleet of junky phones regardless of their technology worthiness and compare them to Apple's two technologically advanced iPhones, namely the iPhone 4S and 5 models. Seriously, these mainstream writers have decided to dumb down reality to support this mirage that they've created." Yesterday, a former financial advisor John Kirk writing for Tech.pinions published a truly great article called "Android's Market Share is literally a Joke." It's a must read for anyone with a scintilla of common sense.

Kirk starts off with a little humor to drive home his point that the statistics that are being bandied about in the main stream press and blogosphere concerning Apple's poor iPhone market share equating to Android smartphones being the new king of the market is void of common sense when you consider that the bulk of profits are being enjoyed by Apple's iPhone.

Kirk's Joke: Have you heard this one?

"Two farmers bought a truckload of watermelons, paying five dollars apiece for them. Then they drove to the market and sold all their watermelons for four dollars each. After counting their money at the end of the day, they realized that they'd ended up with less money than they'd started with.

"See!" said the one farmer to the other. "I told you we shoulda got a bigger truck."

Or how about this one?

Android is winning because they got a bigger truck.

The Joke is On Us

Kirk states that "Both 'jokes' are based upon the old saw that one can lose money on every sale but make it up in volume. Unfortunately, the joke is on us because this is exactly the kind of nonsensical analysis that is being doled out by tech pundits and lapped up by the press and investors. You think I'm exaggerating? Take a gander at some of these recent tech headlines:

01: Android is crushing Apple and Microsoft in the mobile device market

Kirk concludes his first section by stating that "In other words, pundits think that Android has won because they "have a bigger truck" (i.e. more market share) – regardless of how much – or how little – profit Android manufacturers make. Android, the pundits opine without a hint of irony, is not making much, if any, money but that's okay because they're making it up in volume."

Kirk's report intelligently strips the entire Android volume storyline down to the bone with varying examples to make the case that volume without profit isn't much to brag about. At one point, Kirk uses sporting examples to make his point crystal clear for everyone trying to understand that sales volume alone without profit is useless.

Kirk states that "scoring by market share alone and ignoring profit is like saying that a baseball team won because it had more hits when the other team scored more runs. Scoring by market share alone and ignoring profit is like saying that a football team won because it gained more yards when the other team scored more points. Scoring by market share alone and ignoring profit is like saying that a hockey team won because it had more shots on goal when the other team had more goals."

If that's still not clear enough for you, Kirk painstakingly goes through various examples of communicating the very same message with segments such as: "The Wrong Way to Calculate Who's Winning; The 'Fair-Share' Way To Calculate Who's 'Winning'; Market Share or Profit Share; Less Market Share Can Be Better Than More, and lastly, Price Elasticity."

If you have the time in the next few days, you should read Kirk's article that's one of the best ever written on the topic that basically boils down the argument of marketing propaganda of product volume vs. product profitability.

I'll end the way that I started. In March we reported that, "the main stream press has created this grand consumer mirage that's a true disservice to the overall market. The press is mentally stuck in using a "volume" of cell phones metric as a measurement of technology leadership.They use Samsung's entire fleet of junky phones regardless of their technology worthiness and compare them to Apple's two technologically advanced iPhones, namely the iPhone 4S and 5 models. Seriously, these mainstream writers have decided to dumb down reality to support this mirage that they've created."

At the end of the day, the view held by the main stream press about Android being the market leader based on statistical volume alone is a sham. Did you hear the joke about the two farmers?

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Comments

For Android, Market share is money. Google business model is based on size of Truck! Bigger the truck (market share), more eyeballs and users for Google ADs and services. Google does not care what profit is being made on the sale of devices.

Prior to android, only a few people used smartphones because the one and only smartphone that was available was a high end one with a heavy price tag. What Android has done is that they have bridged the gap between low end (call only) phones and the high end multimedia iPhone. So now many people can afford a smartphone. But this does not change the audience for the high end iPhone. Although Android has introduced flagships to rival the iPhone, statistics say that still most high end users are sticking to their already familiar iDevice. Most of them are yet to take a leap of faith from iOS to Android. So even though the pie chart of market share has shrank to accommodate the new middle tier and lower tier smart devices, it does not affect the sales of the iPhone. Websites that display market share percentages as pie charts doesn't advertise the net amount, whose percentage they are calling as market shares.

Yes, Wall Street almost crashed America they're so bloody smart. How foolish it is to think that market share alone is worth anything. Wall Street's .com bubble killed the little investor because X.com company selling air bubbles had the most market share. How well did Wall Street's wisdom do then? How many investors lost their shirt to Wall Street Salesman who will switch sides in a heart beat if the wind blows just right. Give me a break about what Wall Street Prophets think.

Google may begin to introduce projects like Glass next year and they may out-innovate Apple one day or in the long run. That's the future. For now, in the real world, selling a gazillion cheap pieces of crap-phones pushing Android to third world countries does not make Android a winner in and of itself, whether Wall Street thinks so or not. Most of those countries sell pirated software so it doesn't help the Android developer.

Great piece. It should also be pointed out that something like 95% of Android phones sold are made by Samsung, who are rapidly distancing themselves from Android, building a proprietary layer atop the free OS much as OS X does with FreeBSD. Eventually the other handset makers will be bought up, disappear, or operate at the extreme margins of the market. Their customers will go to either Apple or Samsung, so ultimately it will be iOS vs SamsungOS (whatever they call it), not iOS vs. Android. Microsoft is too late to the game, and I think Google blew it with Motorola (if they ever even planned to do anything with it other than use the patents). It's looking like iOS vs. Samsung is the new Mac vs. PC.

You people seem to be blindly ignoring the fact that Wall Street doesn't think Android's market share is a sham. Apple is seen as the big loser and investors are putting their money on Android.

There are an awful lot of influential people saying Google has a much brighter future than Apple due to the overwhelming numbers of Android device sales.

The whole point of winning in the smartphone industry is to sell lots of smartphones and that's the standard Wall Street uses to value companies. The less market share Apple has, the lower the share price will be.